SEC Sues Over Alleged Bogus Bailout of Richard Branson's Virgin Orbit
Overview of the Legal Action
The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against a Texas man over an alleged fraudulent $200 million offer to rescue Richard Branson's now-defunct satellite launch company, Virgin Orbit. The SEC's complaint seeks a civil fine, a ban on offering securities, and other legal remedies.
The Key Allegations
The SEC claims that Matthew Brown falsely presented himself as an experienced venture capitalist with investments in "over 13 space companies". He made what is alleged to be a bogus offer to buy Virgin Orbit stock on March 19, 2023, as the company was nearing bankruptcy.
According to the SEC, Brown fabricated a screenshot of his company's bank account to show a "current" balance of $182,383,991, although it reportedly contained less than $1. He also demanded a 3% "break-up" fee if his investment did not close. Following Brown’s offer, Virgin Orbit's stock price increased by 33% but fell after the offer collapsed.
SEC's Immediate Concerns
The SEC asserts that Brown lives in the Dallas-Fort Worth area. He could not be immediately reached for comment, and a Dallas address listed in the court documents has an unlisted number.
Virgin Orbit’s Financial Struggles
Once valued at $3.8 billion and boasting the U.S. military among its largest customers, Virgin Orbit filed for Chapter 11 protection on April 4, 2023. The company faced challenges in securing long-term funding after a failed launch three months earlier. Virgin Orbit was originally spun off from Virgin Galactic in 2017.
Discrepancies in Brown’s Claims
Virgin Orbit stopped engaging with Brown on March 25, 2023, two days after he told CNBC that he was in "final discussions" on a rescue plan. This decision was based on concerns about his credibility, according to three people familiar with the talks.
In interviews conducted in early April 2023, Brown dismissed the accusations of deception, stating, "I absolutely, 100%, had the money."
Legal Proceedings
The case is titled SEC v Brown, U.S. District Court, Northern District of Texas, No. 24-00558.
Important Takeaways
- SEC Lawsuit: The SEC is taking legal action against Matthew Brown, alleging a fraudulent $200 million offer to rescue Virgin Orbit.
- Fabricated Financial Proof: Brown is accused of falsifying a bank account screenshot to display a fake balance.
- Stock Price Impact: Virgin Orbit's stock briefly surged by 33% due to the offer but fell after its collapse.
- Virgin Orbit’s Bankruptcy: The company filed for Chapter 11 protection after struggling to secure funding post a failed satellite launch.
- Case Information: The case is filed under SEC v Brown, U.S. District Court, Northern District of Texas, No. 24-00558.
